It is no longer a blip, but a trend. Home sales are weakening, and they are not expected to improve anytime soon.
A monthly index measuring signed contracts to buy existing homes fell 2.6 percent in August compared to July. That is the fifth drop in the past six months and below expectations. The National Association of Realtors' so-called pending home sales index is now down the same amount compared to August of 2016, hitting the lowest level since January of that year.
"August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes," said Lawrence Yun, chief economist for the Realtors in a release. "Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search."
Yun said he believes the housing market has "essentially stalled." He lowered his forecast for full-year existing home sales to 5.44 million, which is 0.2 percent below 2016's pace. The original prediction last January for 2017 was 5.57 million, an increase of 2.2 percent compared to 2016. A consistent drop in supply and spike in home prices are largely to blame for the change, but two devastating hurricanes only added to the weakness.
The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year," said Yun. "The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9 percent."
Regionally, pending home sales in the Northeast fell 4.4 percent for the month and were 4.1 percent below a year ago. In the Midwest the index decreased 1.5 percent for the month and was 3.2 percent lower than August 2016. Pending home sales in the South fell 3.5 percent for the month and were 1.7 percent below last August. In the West sales declined 1.0 percent monthly and 2.4 percent annually.